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As immediate payments sweep APAC, all eyes are on NPP
The momentum for immediate payments is growing globally as more schemes are introduced to mirror the around-the-clock, real-time reality of today’s commercial environment. Nowhere is this more evident right now than in the Asia-Pacific region where countries including Australia, Japan and Malaysia are at some stages in the implementation of an immediate payments infrastructure. Singapore implemented immediate payments last year.
Eli Shoshani 24 Jun 2015
 
   

The momentum for immediate payments is growing globally as more schemes are introduced to mirror the around-the-clock, real-time reality of today's commercial environment. Nowhere is this more evident right now than in the Asia-Pacific region where countries including Australia, Japan and Malaysia are at some stages in the implementation of an immediate payments infrastructure. Singapore implemented immediate payments last year.

 

It is no surprise that immediate payments are surging in popularity. As the pace of life and business continues to increase, payments technology has to evolve to keep pace with new expectations. Also known as real-time payments, immediate payments refers to credit transfers where a customer of one bank initiates a payment to credit an account at another bank, all in a matter of seconds. The credit is immediately validated and a confirmation is sent back to the originating bank, and then posted to the account. This is the future of payments--and it allows for the transfer of money from one account to another immediately, with certainty and convenience, and at little cost.

 

After immediate payments schemes started spreading across the globe--notably in Mexico, Sweden and the UK--Singapore led the push in the Asia Pacific region, developing its fast and secure transfers (FAST) infrastructure. More than a real-time payments system, FAST also provided a low value clearing system, capable of processing real-time single transactions. Using a common messaging standard (ISO 20022 XML) the platform can easily adapt to work with multiple currencies and across borders as required in the future.

 

Australia is now getting into the act, and is in the process of implementing its own immediate payments scheme--the New Payment Platform, or NPP. Described as a "new, fast, flexible, and data-rich payments infrastructure," NPP is slated to launch in 2017. Today, there are 12 leading financial institutions that are championing the course. They have agreed to become founding members of the NPP, and as such have committed funding to build and operate a new, national payments infrastructure.

 

With the NPP underway, there are speculations around which banks and participants will move fast to become early adopters, and which will be adopting a wait-and-see attitude. The major Australian banks and certain foreign banks with a strong local presence will surely form the first wave of direct participants. Smaller banks, on the other hand, would be better served to gradually adapt to NPP and access it secondhand. Many of these banks may find it less daunting to join indirectly, via an outsourced payments service provider or by partnering with another bank and using it as a gateway to the NPP.

 

Regardless, banks should start thinking about the journey to immediate payments today, by laying the groundwork and examining the options open to them. They should assess the various models for linking into and leveraging the NPP and see if simply tweaking existing systems will be sufficient. If not, these firms should begin considering the benefits of working with another bank or implementing a payments hub.

 

In planning their NPP programs, it is important for banks to understand the concept that this migration will not just be another cost burden. It is in fact an opportunity to provide new, more innovative and more responsive services to their business and retail customers across all segments and channels, as well as to improve internal efficiencies and increase profits.

 

Banks throughout Australia--and the region as a whole--have their eyes on NPP, and while 2017 appears a long way off, it will arrive in no time. Banks that take cues from the competition may be doomed to fall behind, but those that are prepared to hit the ground running from day one will reap the rewards.

 

Likewise, other markets should watch Australia and look to the markets that have crossed the chasm in implementing immediate payments schemes, and consider implementing their own infrastructures sooner rather than later. The market demand for Immediate Payments is appearing across the globe. As benefits become increasingly apparent, waiting to institute immediate payments makes increasingly less sense.


Eli Shoshani is senior vice president at Fundtech Asia Pacific, based in Singapore.

 

 

 

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